Toyota to offer compensation for 'unintended acceleration' cases

Consumers are in line to collect compensation from Toyota Motor North America under terms of a proposed settlement to resolve a class-action lawsuit which claimed the Japanese automaker's customers had suffered economic harm.

Consumers who sold a used Toyota or returned a leased vehicles or still own one are eligible for a pro-rated payment from a special $250 million fund Toyota has created to compensate owners. The average payment is expected to total about $250.

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If this economic loss settlement is approved by the judge supervising multidistrict litigation (MDL) pending in the U.S. District Court for the Central District of California, Toyota will launch a new customer-support program that will provide prospective supplemental coverage for certain vehicle components and will retrofit additional non-hybrid vehicle models subject to the floor mat recall with a free brake override system to provide an added measure of confidence.

Customers also can accept a $125 payment in lieu of the brake override. The override automatically reduces engine power if the brake and accelerator are applied nearly simultaneously.

"This agreement marks a significant step forward for our company, one that will enable us to put more of our energy, time and resources into Toyota's central focus: making the best vehicles we can for our customers and doing everything we can to meet their needs," said Christopher P. Reynolds, Group Vice President and General Counsel, Toyota Motor Sales, U.S.A, and Chief Legal Officer, Toyota Motor North America.

"However, we concluded that turning the page on this legacy legal issue through the positive steps we are taking is in the best interests of the company, our employees, our dealers and, most of all, our customers."

The proposed settlement would also establish additional driver education programs and fund new research into advanced safety technologies.

Toyota also announced that it will take a one-time, $1.1 billion pre-tax charge against earnings to cover the estimated costs of the economic loss settlement and possible resolution costs of civil litigation brought in California by the District Attorney of Orange County and an investigation by a multi-state group of Attorneys General stemming from previous recalls.

Jesse Toprak, vice president of analysts for from TrueCar.com, an automotive information website, said Toyota is on the verge of reclaiming its crown as the world's top automaker and wants to put an end to the unintended acceleration issue.

"Toyota wants to put its 'unintended acceleration' recalls behind once and for all and as costly as it might be, this settlement will allow them to remove most of the lingering financial uncertainty," Toprak said.

"Toyota's outstanding performance this year is a proof that consumer sentiment for the company's products has already recovered to a degree as if nothing ever happened. The additional investments by the company will also help to minimize any safety and quality issues going forwards," he added.

"This settlement is a nod to loyal Toyota owners whose car resale values were hurt by the unintended acceleration issue and the intense publicity that followed," said Michele Krebs, an analyst with Edmunds.com, which also offers consumers information about cars.

"A billion-dollar payment will sting any company, even a major international automaker like Toyota. But by announcing the settlement today, Toyota hopes to leave these troubles behind and move forward in the new year," she said.